Africa a Strategic Market for Lafarge

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Researched by Industrialinfo.com (Industrial Information Resources Incorporated; Houston, Texas). Lafarge S.A. (NYSE: LR) (Paris, France) is aggressively pursuing a strategic plan to increase capital investment in emerging markets, such as that in Africa. Lafarge's capital investment in Africa includes acquisitions, plant expansions, and grassroot development. Lafarge, like many other conglomerates operating in Africa, faces daily challenges of unpredictable production costs. These costs, hidden in areas such as high cost and unreliable power, water, telecommunications, rail, poor road network, frequent fuel shortages, and political instability, have not deterred Lafarge from investing in Africa and even realizing a profit.

Case in point: Lafarge's half-year sales results for this year highlights Nigeria, South Africa, and Kenya as the markets that registered tremendous growth in sales volume across all four divisions, proving that Africa is a good potential cement market.

The demand for cement and cement products in Africa is growing and continues to grow, especially since world statistics indicate that operating cement factories in Africa do not have the capacity to meet current demand, let alone address future needs. For instance, about ten million tons of cement is needed for the reconstruction of the war-torn nation of Angola. However, the local factories can only produce about a million tons a year. Even Nigeria, the most populous nation in Africa, does not produce enough cement for local consumption.

Click on the image at right to view a 2-Year analysis of African projects by industry. The analysis represents 252 projects derived from Industrialinfo.com's international project database.

Lafarge tries to stay ahead of its main African rival, HeidelbergCement AG of Germany (HEI.BE), by increasing investment in other areas, such as retooling and modernizing its brownfield operations, with new high-tech equipment. Although, Lafarge has just completed a $ 9.1 million upgrade of its Lichtenburg, South Africa, cement plant, it is already considering construction of a new production plant in South Africa. Early this year, its Moroccan subsidiary, Lafarge Maroc, commissioned a new 960,000-ton-per-year cement plant in Tetouan, Morocco. Kawasaki Heavy Industries (KHI) of Japan constructed the plant. The $50 million plant, dubbed Tetouan II, is located in an industrial complex, where Lafarge Maroc already operates a 250,000-ton-per-year cement plant. Still in Morocco, Lafarge has commissioned Polysius to expand the Bouskora cement plant, by adding a new 900,000 tons per year production line, at a cost of over $90 million.

Lafarge started its African operations with a plant in Algeria in 1866. Since then, it has established plants in Morocco (Lafarge Maroc), Kenya (Bamburi Cement and East Africa Portland Cement), Nigeria (Lafarge Nigeria Limited), Benin (SCB Lafarge Benin Cement), Cameroon (Cameroon Cement), Uganda (Hima Cement), Egypt (Beni Suef Egypt Cement), Tanzania (Tanzania Mbeya Cement), Zimbabwe (Circle Cement), Zambia (Zambia Chilanga Cement Plc), Malawi (Malawi Portland Cement), South Africa (Lafarge Roofing, Lafarge South Africa Limited (aggregates and concrete), Gabon (Gabon Cement), and Madagascar (Sanca Madagascar Cement).

Lafarge employs a total staff of about 35,000 and operates 96 plants in more than 65 countries. The world's leading manufacturer of building materials: cement, gypsum, aggregates, concrete, roofing materials, and specialty products. In July 2001, Lafarge was introduced onto the New York Stock Exchange (NYSE). Lafarge is listed in American Depositary Receipt (ADR) on the NYSE with the ADR symbol LR.

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